Fat chips reduced to small fries

Semiconductor biz feels the pinch as growth falls

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Chipmakers have fired off a warning that they expect to see the semiconductor industry slow with a predicted sales growth of less than two per cent this year.

The grave assessment issued by the Semiconductor Industry Association (SIA) has been pushed down from an original forecast of 10 per cent microchip sales growth for 2007.

SIA attributed the re-jigged figures to sharp declines in the average selling price in three significant segments: microprocessors, D-ram, and Nand flash memories.

It said strong unit growth was expected and that the revised sales growth prediction of 1.8 per cent was worth $252bn (£128bn) in 2007, rising to $306bn in 2010.

SIA president George Scalise said: "PCs continue to be the largest single end market for semiconductors. Despite strong unit PC sales growth, we expect that total sales of microprocessors will decline by 1.6 per cent as intense competition is contributing to price erosion at a more rapid pace than historical patterns."

Microprocessor makers Intel and AMD have likely contributed to the decline with both locked in a price war, slashing costs to push up sales.

Scalise added that the D-ram market was under severe price pressure. He said: "Average selling prices in April of 2007 were down by approximately 33 per cent compared to December of 2006."

MP3 players largely depend on Nand flash for storage of music, but despite an explosion in demand with an expected growth of 20 per cent this year, according to Scalise "the market segment is experiencing price attrition in a very competitive environment".